Rider vs. Rate Up

Some people are totally against riders while others are not. I don't anticipate anyone will change their mind one way or the other, but here are some things to consider from a different point of view.

Stop loss carriers have been lasering (offering exclusion riders) to employer groups for 20 years or longer. In an attempt to keep the premium affordable and individual would be lasered out of the group entirely, or they would be offered a higher SIR (self insured retention).

Some employers objected to the laser approach, so carriers started offering rate up's in place of the laser and the employer could choose.

The same thing happens in individual health insurance, depending on the medical condition & carrier.

Riders come in two flavors . . . tight & loose.

A tight rider states the carrier will not cover treatment of a specific condition. Any other medical condition, even if it can be presumed to be related to the excluded condition, will be covered by the carrier. So a carrier that offers a tight rider on HBP will not cover the treatment of HBP (including meds & doc visits specifically for the HBP) but will cover any other condition that may be related. If the ridered individual has a heart attack, stroke, kidney failure or any other medical condition that is not specifically mentioned in the rider there is coverage for the new ailment.

A loosely worded rider is one that states the carrier will not cover the ridered condition nor any new condition that could be related to the existing condition named in the rider.

A rate up is simple to explain. The carrier takes into account the potential cost of treating the existing condition, then adds a margin to that expected cost and builds it into the premium. But there is a catch . . .

Almost all plans state that the plan will limit the amount payable for meds when a generic or other low cost alternative is available. If your client is on a tier 3 med and a generic is available the premium will be surcharged to account for the higher priced med but may only cover the generic. The same is true if a tier 2 med is available. The plan will only allow the tier 2 med to be covered and the client will be out of pocket the difference PLUS the premium surcharge.

The carrier almost always wins in a surcharge situation. They collect more premium than is needed and limit what they will pay once the condition gets to a point where reimbursement can occur.

One can validate a carriers position (to a point) where a copay is involved. However many carriers apply the same rate up percentage to plans regardless of whether there is a copay or not and whether the deductible is $1000 or $5000. The carrier is taking advantage of a client in many cases when they surcharge the premium 30% on a $5000 deductible with no copays and the same amount on a $500 deductible with copays.

Explain the differences in the offers to your client and give them the choice of deciding if they want to pay more and have coverage or if they would rather self insure the risk.